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Posted March 02, 2022

What is a "Blockchain" and for what it is used for?

What is a "Blockchain" and for what it is used for?

These days there is a lot of talk about the new fall of the cryptocurrency.

Whether you like it or not, it is difficult to be excluded from the whole story and not notice certain terms related to this topic.

One of the most frequently mentioned terms when talking about cryptocurrencies is certainly “blockchain”. 

At this point, most people have at least heard of it, and even if they don’t know what exactly it serves, they associate it with Bitcoin and cryptocurrencies.

Although people first used blockchain technology in cryptocurrencies, they are not the only option for its use.

The concept for the blockchain has been around since 1991.

Two researchers, Stuart Haber and W. Scott Stornetta, first mentioned it in their work – entitled “How to Time Mark a Digital Document”.

Also known as Distributed General Ledger (DGL) technology, a blockchain is a record to which anyone can add some kind of entry that cannot be changed.

  It is also not controlled by a person or legal entity.

Table of Contents:

- Basic Concept of Blokchain Technology

- Blokchain Technology – Only for Crypto or…

Basic Concept of Blokchain Technology

The basic concept is actually a public general ledger with copies arranged in several locations called “nodes”.

Nodes usually refer to individual computers that have a copy of that general ledger in them. 

Here we come across the term “decentralization” when we talk about blockchain as a technology – no person or legal entity has control over the data kept in the records of that general ledger. 

The many nodes distribute the data among themselves, forming the network together.

To make a change or entry in the book itself, similar to databases, everyone online must first check the change

The system knows it can update the information only when it determines that all copies of the records match.

This system ensures that it stores accurate information inside the blockchain and builds trust in the recorded data.

Decentralization of Blokchain

 

Decentralization of the blockchain also prevents the possibility of destroying the entire database if there is a failure on one node. 

For example, if you store all your business information on a server in one building, you risk losing that data if something happens to the server’s location.

Since every computer on the network has a copy of the blockchain, the entire system can continue to function even if one or more nodes disconnect.

When you add new information to the general ledger, you record it in a group called a block.

We string these blocks together to form a chain of records, hence the name blockchain.

Once you enter the data, you cannot change it—only new blocks can be added.

For a more illustrative example, think of a blockchain as a shared document among team members.

Anyone who has access to this document can add information to it and thus edit the document. 

Each team member can see the changes made in real time, identify who made those changes, and view a complete history of all changes ever made for full transparency.

Most important part is the fact that the data is not stored on servers.

Each team member has their own local copy that can communicate directly with other copies of that document.

Blokchain Technology – Only for Crypto or…

Although people most commonly use blockchain technology for cryptocurrencies like Bitcoin, they sometimes confuse the technology with the cryptocurrencies themselves.

Cryptocurrencies only use the blockchain as a means of recording transactions and an instrument for maintaining confidence in their implementation, but they are not a blockchain in themselves.

In theory, any system that requires the recording of some transactions or data can use a blockchain for this purpose. 

This includes everything from supply chains to various ownership records…with the exception that the blockchain differs from the typical databasE.

Instead of storing information in tables, it stores them in data groups, the so-called blocks.

 
 

As you fill an individual block with information, you add it to the previous blocks in the chain.

Because the system stores data in a linear fashion with timestamps, you can form blockchain data into a timeline of transactions and records, which is especially useful in scenarios where time traceability is important.

Blockchain itself acts as protection against unauthorized access and system failure. 

If one node on the network becomes compromised and someone changes or deletes the transaction data on that computer, the other nodes on the network will reject that damaged record because it does not match their copies.

 Because the data written to the blockchain is immutable and time-stamped, this technology provides a transparent record of everything ever added to the system.

Anyone who has a node on the network can see every transaction that has taken place. 

There are even so-called “blockchain explorer” programs that allow non-network users to view real-time transactions in real time to further increase transparency.

Using blockchain technology helps to prevent duplicate records and makes additional checks unnecessary. 

What is most important in the context of cryptocurrencies is the fact that this technology provides a solution to the problem of double consumption of digital currency.

There are Some Problems Too…

 

Finally, it is necessary to briefly mention the present problems. 

While blockchain technology insurance is quite powerful, there are ways to get around it. 

For example, if someone steals access data from a person authorized to access the network, they could steal valuable data or cryptocurrencies. 

Scams are not uncommon, so users often lose their cryptocurrencies. Always be especially careful about where, how, and to whom you give your data.

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